LeEco Braves the Ultimate Test

Other smartphone makers have tried, but to date few have managed to drastically alter the market for phones in the US. Will LeEco manage to leave a mark with its two new smartphones?

At a company event yesterday in San Francisco, China-based LeEco displayed several products intended for the US market. In addition to the two smartphones unveiled, LeEco showed some very large smart TV sets and an electric car. As the company name suggests, LeEco is looking to establish an ecosystem of products, services and content (see Instant Insight: LeEco Unveils Ambitious Plans for US Market).

We've previously noted that $400 devices have become the "sweet spot" in the US market for unlocked premium smartphones (see Premium Commoditization). In particular, high-values devices from Huawei, OnePlus and ZTE could slowly mould buying behaviour in new directions. Those devices haven't become megahits in the US, but their availability alone is having an effect on strategies from other handset makers.

The fact that $400 has become a contention point for such flagships hasn't been lost on LeEco. It met that price and offered a $100 pre-order discount. For as little as $299, consumers can buy the 5.5-inch Le Pro3 running a Snapdragon 821 with 4GB of memory, 64GB of storage, fingerprint sensor, a 16-megapixel rear-facing camera with 4K recording support, an eight-megapixel front-facing camera, 4,070 mAh battery and quick charging. The company also revealed the Le S3, a 5.5-inch smartphone sporting a Snapdragon 652 with 32GB of storage and a 16-megapixel camera with 4K support. Normally priced at $249, it also comes with a $100 pre-order rebate.

The devices can be used on T-Mobile and AT&T networks with support for those carriers' LTE bands as well as GSM and WCDMA. Verizon's and Sprint's CDMA networks are not supported.

There's no doubt that these phones offer significant value. At around half the price of similar smartphones from well-known brands, logic would suggest that the Le Pro3 is certain to grab a sizeable amount of market share. In reality, without direct retail support from carriers, this won't be a mainstream device in the US.

The core question is at what point do mobile subscribers in the US alter their flagship smartphone buying habits? Unlike most other markets, few consumers in the US buy their handsets outside the realm of their wireless provider. Carriers typically offer interest-free, 24-month financing and ongoing service. In fact, we suspect that most consumers in the US are unaware of the option of using such open-market devices on a network. And if they are aware of the possibility, LeEco is an unknown brand in a brand-conscious market.

LeEco has now officially entered the US smartphone market, an ambition the company has always made clear — see Bold Expansion Plans from LeTV (Who?). The company has lofty goals, but LeEco is unlikely to post big numbers before it can establish its brand, a tough feat in a market dominated by Apple and Samsung. LeEco's strategy will be a test of the US market's evolution.